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Statement > State of Internal Control

Introduction

The Malaysian Code on Corporate Governance requires listed companies to maintain a sound system of internal control to safeguard investments and the Group’s assets. The Bursa Malaysia Securities Berhad ("BMSB") Listing Requirements, Paragraph 15.27 (b) requires directors of listed companies to include "a statement about the state of Internal Control of the listed issuer as a group.

The Board is committed to maintain a sound internal control system in the Group and is pleased to provide the statement which outlines the nature and scope of internal control for the Group during the financial year.

Board Responsibility

The Internal control system covers not only financial controls but operational and compliance controls, and risk management.The internal control system is designed to enable the Group to manage the risk of failure to achieve business objectives and to provide reasonable and not absolute assurance against material misstatement and losses.

During the financial year, internal audit work was performed on areas identified in the audit plan. The internal audit reports encompassing findings and recommendations were then presented to the Audit Committee. Actions were agreed in response to the recommendations and these were followed up to ensure satisfactory control is maintained. The audit plan shall be reviewed annually as the risks the Group faces are continually changing as the Group’s objectives, the organization and the environment in which it operates are continuously evolving.

In reviewing the adequacy and integrity of the system of the internal control and management information system, the Board has taken account of the results of all the audit work carried in the Group.

The Board believes that the Group complies with the requirements of the Malaysian Code of Corporate Governance relating to Internal controls as set out in "Statement of Internal Control : Guidelines for Directors of Public Listed Companies".

Key elements of the Internal Control

The current system of Internal Control has the following key elements:

• Periodic board and management meetings to review financial performance and business operations of the Group;

• An organization structure with defined reporting lines. An operational structure with defined lines of responsibility and delegation of authority is in place. A process of hierarchical reporting has been established which provides for a documented and auditable trail of accountability;

• Internal policies and procedures are in place and regularly updated to reflect changing risks or resolve operational deficiencies. Instances of non-compliance with such policies and procedures are reported thereon by its internal audit function to the Board via the Audit Committee.

• The external auditors’ review on the statutory requirements on financial statements and their underlying controls and records.

• The group has a risk management framework to identify and profile its operational risks. Due to the changing business needs it has to be dynamic rather static.

A number of minor internal control weaknesses were identified during the period, all of which have been, or are being addressed. None of the weaknesses have resulted in any material losses during the financial year. The management continues to take measures to strengthen the internal control environment.

The Board believes that the development of the system of internal control is an ongoing process and has taken steps throughout the year to improve its internal control system and will continue to do so.

This statement is made in accordance with a resolution of the Board of Directors dated 26 May 2004.

This statement is made in accordance with a resolution of the Board of Directors dated 19 May 2003.